International Business Machines Corporation

Welcome and thank you for standing by. At this time, all participants are in a listen-only mode. Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now I will turn the meeting over to Ms. Patricia Murphy with IBM. Ma'am, you may begin.

Thank you. This is Patricia Murphy, and I'd like to welcome you to IBM's first quarter 2023 earnings presentation. I'm here today with Arvind Krishna, IBM's Chairman and Chief Executive Officer. and Jim Cavanaugh, IBM Senior Vice President and Chief Financial Officer. We'll post today's prepared remarks on the IBM Investor website within a couple of hours, and a replay will be available by this time tomorrow. To provide additional information to our investors, our presentation includes certain non-GAAP measures. For example, all of our references to revenue growth are at constant currency. We have provided reconciliation charts for these and other non-GAAP measures at the end of the presentation posted to our investor website. Finally, some comments made in this presentation may be considered forward-looking under the Private Securities Litigation Reform Act of 1995. These statements involve factors that could cause our actual results to differ materially. Information about these factors is included in the company's SEC filing. With that, I'll turn the call over to Arvind.

Thank you for joining us. Our first quarter results demonstrate that clients continue to turn to IBM to help them address today's business needs while positioning them for the future. We had a good start to the year with mid-single-digit revenue growth at constant currency in line with our mid-term model and growth in free cash flow. Performance was led by software and consulting as clients continued to accelerate their digital transformations modernize their applications, automate their workflows, and create flexible and secure hybrid cloud environments. More recently, clients are prioritizing digital transformation projects that focus on cost takeout, productivity, and quick returns. While demand for our offerings that support these priorities remain solid, we are seeing some deceleration in consulting from the previous robust growth levels, especially in the United States. Globally, our clients continue to see technology as a fundamental source of competitive advantage. Technology helps them scale and enhance productivity, which is especially important in the face of inflation, demographic shifts, cybersecurity, supply chain issues, and sustainability goals. All of this supports our revenue growth expectations for the year, Our focus remains on revenue growth and free cash flow. Ninety days ago, I shared that in 2023, we'd continue to unlock more productivity, expand our strategic partnerships, and put more investment in specific growth markets. Productivity has always been an important part of our business model. It frees up spending and increases financial flexibility to enable investments. We have started to see some of this payback in our results, which gives us confidence in our ability to achieve our full-year free cash flow objectives. Let me spend a few minutes on the progress we have made in the execution of our strategy. Our focus is on hybrid cloud and artificial intelligence, the two most influential technologies for business. In tandem, these technologies drive both business outcomes and innovations. Hybrid cloud is now the most prominent form of IT architecture, and our approach is platform-centric. Red Hat OpenShift is the leading container platform, enabling clients to leverage the latest innovations in open-source software. IBM software and infrastructure have been tailored for this platform. Our consultants use their technical and business knowledge to speed up clients' digital transformation processes. The first quarter, we co-created with more clients to unlock business value from a hybrid cloud approach. We are working with Virgin Money to migrate their credit card service to the IBM Cloud for financial services. They will also leverage IBM's consulting capabilities to create new digital customer experiences. For the Boston Red Sox, we are collaborating with Wasabi Technologies, leveraging hybrid cloud technologies to analyze key data sources that improve the club's operations. The second element of our strategy is top of mind for a lot of clients, artificial intelligence. AI is projected to add $16 trillion to the global economy by 2030. Keep in mind that AI for business is different than AI for consumers, given their need for more accurate results, trusted data, and governance tools. AI techniques such as foundation models, large language models, and generative AI give businesses the ability to create 100 AI models from a single data set. Early client engagements experience a 70% faster time to value. That is why we are seeing a lot more interest from business in using AI to boost productivity and reduce cost. Productivity gains will come from enterprises turning their workflows into simpler automated processes with AI. To achieve this, we are collaborating with companies like Citi to enhance their internal audit and compliance processes through AI. J.B. Hunt Transport used a Turbonomic AI-powered resourcing and automation engine to optimize their cloud environment. This helped reduce infrastructure refresh costs by 75%. This is a great example of the work we're doing in IT operations. In other areas such as customer care, we are automating hundreds of thousands of call center responses with AI with more than 90% accuracy and greater levels of customer satisfaction. In cybersecurity, our elite defense teams are deploying AI to defend against criminals in real time. In digital labor, We are helping finance, accounting, and HR teams save thousands of hours by automating what used to be labor-intensive data entry tasks. To bring our hybrid cloud and AI strategy to market, our partner ecosystem continues to play a critical role. We expanded our partnership with Adobe to help marketing and creative organizations make the production of content easier. IBM and EY announced a collaboration using IBM software in EY sustainability consulting practice to help companies operationalize decarbonization action plans. Juniper Networks and Nokia also recently expanded their collaboration around IBM's network intelligence and automation solutions to monetize and optimize investments in networks more effectively. We remain focused. on delivering new innovations that matter to our clients. A good example of this is the Cleveland Clinic IBM Discovery Accelerator, where multiple projects are underway that leverage the latest in quantum computing, artificial intelligence, and hybrid cloud to help expedite discoveries in biomedical research. At the Cleveland Clinic, we also recently unveiled the first quantum computer dedicated to healthcare research. To complement our own innovations, in the first quarter we acquired three companies that extend our capabilities in hybrid cloud and AI. We also continue to engage in projects that have a positive impact on society. Many clients are leveraging our technology and expertise to advance their sustainability agendas. For example, in the area of manufacturing, Siemens and IBM are announcing a new software solution that integrates software from both companies to enable sustainable product development. Sustainability is a focus area for all business, and just last week we released our annual report on IBM's efforts in this area, IBM Impact. I'd encourage you to read about our progress in areas ranging from energy savings and carbon emissions reduction to skills development and increasing diversity. I'll conclude by saying that we are confident in the changes we have made to our business over the last three years, aligning our strategy, priorities, and portfolio to the needs of our clients. This work, together with our continued focus on productivity, are enabling us to deliver sustainable revenue and free cash flow growth. I'll now hand it over to James. who will offer more insight into our performance and expectations.